Our Stock of the Week is eHealth (EHTH). eHealth helps people buy health insurance plans. Its business is divided into two segments: Medicare and Individual, Family and Small Business. Sales of Medicare Advantage, which is the private part of the Medicare program, are booming.
EHTH helps insurance carriers reach senior citizens that insurance carriers can’t reach through their traditional methods. Humana and UnitedHealth comprised 40% of EHTH’s revenue in 2018 with Aetna making up another 14%. So far, EHTH is reaching just 1% of the Medicare Advantage market, so the opportunity for growth is substantial.
EHTH’s business is seasonal with the most growth coming during ‘open enrollment’ in the fourth quarter. People enter the plan at other times of the year for various reasons as well, and EHTH did particularly well in this regard in the June quarter when revenue doubled over last year and earnings per share were substantially ahead of expectations.
The company has ramped up its marketing and is incurring additional costs in its seasonally slowing third quarter but is expecting record revenue in the fourth quarter.
The company is expected to earn $1.82 per share in 2019, which is an increase of 92% over last year, and grow it an additional 26% in 2020.
On September 11, 2019, Deutsche Bank initiated EHTH with a buy recommendation and a robust target of $173. The analysts stated the company is highly levered to benefit from the growth of Medicare Advantage, choice in healthcare and the aging population.
SunTrust has a recent price target of $150 and Credit Suisse is at $136.
The stock fell from recent highs due to talk about Medicare for All among Democratic Presidential candidates and also due to a revamping of a “Medicare Plan Finder” tool on the government website. The company believes there will be no immediate impact on their business and has been raising expectations.
Technically, the stock has fallen from highs over $110 following the strong second-quarter report and has found some support in the $70 to $75 area. We are looking for support to build and for the stock to turn up into its next report.
As always. we would not chase the open on Monday but will look to add to our position on either a lower volume pullback or a strong move to new recent highs.
This post is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this post. Do not buy, sell or trade the stocks mentioned herein. We WILL actively trade this stock differently than discussed herein. We will sell into strength and will buy or sell at any time for any reason. We will actively trade into any unusual activity. At the time of this post, principals, employees and affiliates of Shark Investing, Inc. and/or principals, employees and affiliates of Shark Asset Management, Inc. (“SAMI”), directly or indirectly, controlled investment and/or trading accounts containing positions in EHTH. To accommodate the objectives of these investing and/or trading accounts, the trading in these shares will be contrary to and/or inconsistent with the information contained in this posting.